COMPARATIVE PROFIT AND LOSS ACCOUNT

Table 1 presents comparative Profit and Loss accounts of Tata Steel Ltd. for the year ending March 31, 2007 and 2006.

Table 1: Comparative Profit and Loss Accounts of Tata Steels Limited
for the year ended March 31, 2007 and 2006

ANALYSIS AND INTERPRETATION

Some of the prominent trends could be captured by having a look at comparative

Profit and Loss accounts of Tata  Steel Ltd. (Table 1).

It is revealed that there has been a 15% increase in the sales revenue from operations amounting to Rs.2,618.35 crore. In its MD&A section, Tata Steel attributes this increase in sales was mainly due to an increase in volumes and prices of almost all products of the Company.

The interest charges increased by 40% to Rs.173.90 crore as compared to Rs.124.51 crore in the previous year, mainly due to an increase in interest on Forex loans, swap charges for hedging currency and interest rate risks and higher working capital loans.

There has been a 188% increase in the employee separation cost. In its MD&A section, Tata Steel attributes this increase in cost was mainly due to  the change in the interest rate considered for discounting the provision for employee separation compensation.

In its MD&A section, Tata Steel attributes the increase in manufacturing cost was due to increase in volume of sales of various products. The other expenses increased mainly due to an increase in operations as well as due to higher bank charges incurred in connection with raising new loans during the year. The increase in depreciation charges was on account of 1.8 million tonnes steel expansion project in Jamshedpur , completion of the 1 million tonne steel expansion project, commissioning of 4" Precision Tube Mill and 3" Commercial Tube Mill and other sustenance and minor capital schemes.

Further, the manufacturing and other expenses and depreciation shown in the profit and loss account include Rs.25.74 crore and Rs.1.11 crore respectively in respect of Research and Development activities undertaken during the year.

Other factors which have contributed to increase in profits after tax of 20% are:

1. There was increase in other income to the extent of 70% amounting to Rs.178.91 crore. This was mainly on account of dividend income.

2. The matching performance by the operating departments including the raw materials division. The all-round increase in production was backed by improvements in operating practices and productivity resulting in a reduction in consumption of raw materials, energy, refractories, etc.

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